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Welcome to Demographics School

Welcome to Demographics School. presented by Rodney Johnson President, HS Dent. HS Dent. Independent Economic Research Company Forecast economic change based on three key tools: 1. Demographics and demographic trends 2. Predictable consumer spending patterns, and

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Welcome to Demographics School

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  1. Welcome to Demographics School presented by Rodney Johnson President, HS Dent

  2. HS Dent Independent Economic Research Company Forecast economic change based on three key tools: 1. Demographics and demographic trends 2. Predictable consumer spending patterns, and 3. Technological innovation acceptance rates

  3. Economics Have Two Levels Macro Economics – Large trends Micro Economics – individual choices Macroeconomists are wrong about big things Microeconomists are wrong about lots of little things

  4. Economics Relies on the Rational Man Principle Each consumer will make a rational choice when faced with a trade off in his or her personal situation. Think of all the decisions you have made. Think of all the decisions you see others make. We’re screwed.

  5. Economic Change Depends on the Herd Figure out why people do things. Find the main source of economic and emotional pain in people’s lives. What is driving their decision-making? Kids. More to the point – mapping out a plan for the family.

  6. What You Will Learn Background of economics The sources of our research The statistics involved (good and bad) What the Average American looks like Three main tools of HS Dent research – demographics, predictable spending patterns, technology innovation and acceptance What lies ahead

  7. What You Will Be Able To Do Describe how modern, industrialized economies work See the next economic “season” Estimate changes to businesses, investors, and even countries Highlight the opportunities and risks in the next 3, 5,10 and 20 years

  8. Economics Malthusian Economics Classical Economics Keynesian Economics Austrian School

  9. Malthusian Economics Scarcity Current technology Population (crowd-out)

  10. Classical Economics Input of Labor All inputs are incremental Always moving toward full employment by shifting inputs to where needed

  11. Keynesian Circle

  12. Keynes’ Animal Spirits The colorful name that Keynes gave to one of the essential ingredients of economic prosperity: confidence. According to Keynes, animal spirits are a particular sort of confidence, "naive optimism". He meant this in the sense that, for entrepreneurs in particular, "the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death". Where these animal spirits come from is something of a mystery. Certainly, attempts by politicians and others to talk up confidence by making optimistic noises about economic prospects have rarely done much good. Economist.com

  13. Basics of Hayek(Austrian School) Free markets allow best allocation of resources Government intervention (interest rates and other monetary policy ) causes mal-investment Those mal-investments must be worked out of system over time It is the BOOM that should scare you!

  14. Hayekian Triangle Mises Institute

  15. The Federal Reserve

  16. Why Does the Fed Exist? Response to bank panic of 1908 End regional currencies Stop runs on banks

  17. Amended Monetary Act 1913 …the Fed "shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." • www.federalreserve.gov • www.federalreserve.gov/kids

  18. Federal Funds Target Rate2003- April 2012 Data Source: Federal Reserve, 2012

  19. 30-Year, 10-Year, and Fed Funds1988 - February 2012 Data Source: Federal Reserve, 2012

  20. Federal Reserve Balance Sheet 2007-2012 QE 2 First Response to Crisis QE 1 In Trillions Before Financial Crisis Data Source: Federal Reserve, 2012

  21. Federal Reserve Balance Sheet1997 through 2011 Source: Federal Reserve, 2011

  22. Fed Actions Lower short term interest rates Inject liquidity by purchasing illiquid assets Long-term Security Asset Purchase (QE1, QELite, QE2) Operation Twist

  23. VIDEOChris Martenson, Crash CourseMoney Supply & The Fed

  24. What About Gold? Held to $20.67/oz. from 1860s through 1933 Made illegal to hold gold personally in 1933 Moved to $35/oz. under Roosevelt Remained until 1971 when Nixon closed the Gold Window Legal to hold gold again in 1976

  25. Gold, Average Annual Price1900- March 2012 Data Source: World Gold Council, 2012

  26. Why Gold Will Not Become Currency Everyone would have to adopt at same time or risk ruinous rise (see Swiss) Removal of lever for adjusting business cycle (prices versus currency value) Loss of control on the part of government

  27. BREAK

  28. Demographics

  29. Strong Uptrends and Downtrendsin Births

  30. Average Immigrants per Year by Age 1945-2000 Source: US Census Bureau

  31. The Immigration Adjusted Birth Index Immigration Adjusted Births

  32. Demographics How many people born in each year The numerical effect of immigration Composition of US population by age groups Where the information comes from (NCHS, Census) Websites of interest: www.cdc.gov/nchs/www.census.gov

  33. Predictable Spending Patterns

  34. Average Annual Family Spending by Age (5-year age groups) 46-50 Spending Age

  35. Change in Spending at each Age & Stage of Life 46-50 Family, College Kids 22-30 Young Married 31-42 Young Family 50+ Empty Nesters 18-22 Single 60+ Retired

  36. Boomers Are Not Different! Front end of Boomer generation began retiring in 2003 Wave continues through 2025 Spending STILL PEAKS approx. age 48-50

  37. The Adult Life Cycle Education (college, trade school, etc.) Workforce Apartments Marriage Children Home purchase Second home purchase Children leave Pay down debts Save for retirement Vacation property Retirement property

  38. Only Works for Some Economies must be Industrialized Modernized Democratized in terms of consumers holding funds

  39. Who Spends What in the Economy2011 Data Source: Bureau of Economic Analysis, 2012

  40. Who Spends What in the Economy 2002-2010 Data Source: Bureau of Economic Analysis, 2012

  41. Composition of U.S. Gross Domestic Product 1929-2010 Source: Bureau of Economic Analysis

  42. Who Spends What in the Economy2011 Data Source: Bureau of Economic Analysis, HS Dent Research, 2012

  43. Share of GDP, Accounting for Government Social Programs and Financial Recoveries Data Source: Bureau of Economic Analysis, HS Dent Research, 2012

  44. Percent of Personal Income Contributed by Government Programs Source: BEA, HS Dent Research, 2012

  45. Total Government Transfer Payments 2002-2010 Billions of dollars Data Source: Bureau of Economic Analysis, 2012

  46. Real Personal Consumption Expenditures1995 – 2011 Billions of Chained 2005 Dollars Data Source: Bureau of Economic Analysis, 2012

  47. Real Personal Consumption Expenditures 1995 - 2011 Missing Growth Billions of Chained 2005 Dollars Data Source: Bureau of Economic Analysis, 2012

  48. Composition of U.S. Personal Consumption Expenditures Data Source: Bureau of Economic Analysis, 2011

  49. This Is What You See

  50. Potato Chip Purchases by Age $ Per Year Age of Head of Household 42

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